The 2026 Value-Add Real Estate Playbook (30%

Dave:
You’re not going to find cashflowing houses sitting on the MLS like it’s 2018. You need to create your own asset. You need to build your own equity. And as an investor, that’s your job. And that’s the part of real estate investing that honestly scares a lot of people away in the current housing market, but fortunately it doesn’t have to. Value add can be as easy as a new coat of paint or a bathroom makeover, so you can raise your rents and add an extra few hundred bucks to your bank account every month. Or it can mean larger renovations that supersize your equity and put you on the fast track to financial freedom. There’s actually four categories of value add investing, ranging from cosmetic updates to light renovations, heavy renovations, all the way up to new development. And today, three experienced value add investors will help you determine which exact strategy you should use to add value on your next investment.
Plus, we’ll even reveal how you may be able to add hidden value with extra square footage or even another bathroom in properties you already own.
What’s up everyone? I’m Dave Meyer, Chief Investment Officer at BiggerPockets. And I’m joined today by truly the dream team of value add investing. My co-host, Henry Washington and our friend from on the market, James Dainard. And in today’s episode, we’re going to go through the different levels of value add investing, everything from cosmetic to gut down rehabs. And we’re going to give you a really good overview that you could use in your investing. But also, if you want more hands-on instruction for how to be a great value add investor, we have a really super fun and exciting announcement. Henry James and I are going to be hosting a one-day value add conference in Seattle this March 28th. It’s the first time we’re ever doing something like this. Only 120 tickets are going to be sold. It’s going to be a somewhat intimate conference here with hands-on instruction from some of the best value add investors in the entire country.
So if you want to check that out, you can go to biggerpockets.com/seattle and get your tickets. Not a lot of tickets. So if you’re interested, go get those today. So let’s jump into our episode today. Henry, maybe you could just tell us what are sort of the big buckets or different styles of value add investing that there are?

Henry:
Yeah. Well, first and foremost, value add investing means just that, right? You are going to do something that should add value to the property. Could mean adding actual dollars to the property, but there’s also value add in terms of adding perceived value, which may increase buyer’s desire to want your property because of what you’ve done to it. So that’s how I think about value add. And the categories I lump this into on the low end of the spectrum are just cosmetic updates. When I think of a cosmetic rehab, all I think about is paint and floors. Those are the main things you’re going to be doing. You’re not moving any walls, relocating a kitchen from one side of the house to the other. This is just simply we’re refreshing what’s already there.

Dave:
This is my comfort zone. This is where I’ve lived for a decade. I’ve lived here.

Henry:
Yeah. This is the stuff that anybody should be able to do. Most people can run a cosmetic update by themselves. They don’t need to hire some general contractor to come do all those things. Now, should you, that depends on the project, but you typically aren’t even having to pull permits to do some of this work. It’s truly just refreshing what’s existing. The next bucket I think about is a light renovation. And so the difference in my opinion between a cosmetic and a light renovation is that in a light renovation, there may be some more structural things that you’re doing. Yes, you’re going to do the paint and you’re going to do the floors, but maybe you do need to remove a wall. Maybe you’re going to put new windows in the property. You’re going to spend a little more money, do some things that are a little more structural, but for the most part, it’s a cosmetic update with-

Dave:
A little spice on it.

Henry:
Yes. A little chili powder on top, right?

Dave:
This is the stuff though that doesn’t even get James out of bed in the morning.

James:
Oh, don’t get me wrong. I love a cosmetic fixture. I just can’t make very much money on them in my

Henry:
Market. Next bucket is your heavy renovations. So when I think of heavy renovations, you’re going to do everything you do in a light renovation, but you’re probably moving walls. You may be relocating kitchens. You may be adding bathrooms, whether you’re on concrete foundation or slab foundation. It may be that you’re doing foundation work, putting a new roof, you’re doing new mechanical systems, water heaters, plumbing systems, electrical. This is major systems and structure. And then the finish work, which is the paint flooring, tile work, things like that. So when they say a gut rehab, that’s what I envision when I think of the heavy renovation bucket. It may be down to the studs, maybe it’s got the walls up, but you’ve got to do everything. You might need to get an engineer involved. You might need to get somebody involved to help you draw up plans.
You’re probably going to need to pull permits for the majority of the heavy lifting that you’re doing. This is a full-blown, almost new construction project, but the walls and everything are already up.

Dave:
Which make it harder than a new construction project,

Henry:
Right? Arguably it is. It’s what I’m learning because I’m doing my first ground up development this year and I’ve done heavy renovations. And the ground up development, once you have the plans, you just kind of hire people to do the stuff. It kind of moves a little more smoothly. The heavier renovations, they’re scary.

James:
Yeah. On new construction plans, the benefit is you don’t find mold inside your walls, rot, fire damage, termites. Definitely more predictable.

Dave:
Yeah. I mean, I’ve never done ground up development, but I feel like ground up development’s like you buy a Lego kit and you know all the pieces are there, you just have to follow it. And a heavy renovations, you have that bucket of Legos where you just have a thousand from different things and you pour it out on the ground. They’re like, “Now go build a house.” You have to kind of make it up as you go

Henry:
Along. Some of the Legos are already there and you have to piece some other ones in to fit with what’s already there.

Dave:
Yeah. They’ve been super glued together and you’re like, “What the hell? How do I bring these things apart?”

Henry:
That

James:
Is probably the best analogy I’ve heard.

Henry:
Yes.

Dave:
Well, I think those buckets make a lot of sense because you’re sort of going from on the low end, lowest risk, but also lowest reward.You could get some upside, but if you do a heavy renovation, probably highest risk, highest reward at this point, ground up development, I think depending on that. But that’s just a way for everyone listening to sort of think about the different categories here. As we talk about this, you should be thinking about which type of value add investing makes sense to you. And before we go any further, I just want to caveat this and say that although a lot of times value add investing is associated with flipping, you can and probably should be doing this stuff for rental property investing too. I think that’s kind of the epiphany I had two or three years ago when the interest rate environment changed.
It’s like, I don’t necessarily want to be a flipper, be doing a lot of flips, but if I want to be a good rental property investor in today’s day and age, I at least need to be doing light renovations and maybe doing heavy renovations to maximize my performance. And so I think everyone, regardless of strategy, to be honest, most people should be doing value add these days. I mean, James and Henry, I’m curious if you agree.

James:
Yeah, because it makes you that Swiss Army knife investor. One of the best things we ever did in our investing career was to A, find a deal. How do we find a deal and analyze it correctly, but B, how do you implement the construction plan? And by flipping, we have changed our whole investing career because everyone thinks of us as flippers, but we build homes that’s the adding value, right? That’s the same type of process. You got to create a plan, budget it, implement it. But most importantly, in Seattle, it’s really hard to get good rental properties with equity or they can break even our cashflow in Seattle, San Francisco, any of these expensive markets. So the reason we love value add is because we don’t have a choice. And so we’re able to take down multifamily properties that most people do not want to take down or they cannot make the numbers work.
And we can make the numbers work because we know how to control the cost. And that’s implementing that value add. And the money we’ve made in the wealth we’ve made on our rental portfolio has way outweighed what we’ve made on our flipping business. But the flipping business gave us the tools to be able to buy those properties, stabilize them and increase them.

Dave:
All right. Well then let’s dig into each of these topics. So easiest to hardest here. Let’s just start with cosmetic updates. So as Henry enlightened us before, this is like bathrooms, paint. I think about refinishing stuff, sprucing it up. What are some applications for cosmetic updates, Henry? And what kind of investors does this make sense for?

Henry:
This is great for beginning investors because it gives you a taste of what it’s like to work with a contractor or subcontractor to get a project done and to manage that project. It’s much easier to manage a cosmetic rehab because the timeframe is shorter. The scope of work is shorter and not as intense. The dollar values for the labor and materials are less. And so it’s a great way to get your feet wet because we’re all going to make mistakes and have made mistakes when working with contractors and managing renovations. Is it always easy to find a cosmetic update where you’re going to buy it at a price point that’s going to allow you to slap some paint on it and sell it for a whole lot more money? They’re not easy to find, but they do exist. And if you put that into your buy box and you’re specifically searching for these kinds of products and you’re being very intentional, yeah, you can probably find them, but obviously best for new investors.

Dave:
Definitely good for new investors because let’s just be honest, anyone can do this. It’s not difficult. It sometimes is going to take you getting multiple quotes. You might have to fire a contractor and hire a new one, but anyone can do this. You can figure out what floors to put in. You can figure out what paint to do. And you’d be amazed by how much that can improve maybe the value of the property if you’re selling it, but just the rentability too. You’re going to command a higher rent, you’re going to have more people who apply for your rentals. This is a great thing. So for all new investors. The other two categories of investors I would say that this works well for are out of state investors. If you’re buying something and you want to do a little bit of work to improve your properties, but you’re doing it from afar, these are kind of projects, at least in my experience, that go well out of state.
Most property managers can handle this kind of renovation on your behalf on a good timeline and on budget. This isn’t super complicated where you need to be on site every day. Get some photos, go to the property, pick a paint color, get some LVP and go do it. This is good for that. The other thing I’d say is just for busy people. If you’re not going to be spending a lot of time at your project, cosmetic updates can be great. But as Henry said, it’s maybe not, especially in today’s day and age, going to add a ton of value to the property today. If you’re flipping, this might not work, but if you buy a property and you want to hold onto it for 10 years and you’re saying like, how do I improve this so that I can command the best possible rent for the next 10 years, cosmetic updates all day?

James:
The reason it’s good, because it’s still just organizing subs and organizing implementation, but it’s a very tangible thing for you to wrap your brain around. If I’m going to install flooring and I know someone will install it for $2 a square foot, I can go shop over and over and over again to get my flooring price down. And so it’s very easy to control your cost. That’s what’s so beneficial for all new investors. But when you start going, “Hey, I got to rewire this whole house.” It’s going, “Okay, well, how much does this cost?” Yikes. “What do I got to do? ” But cosmetic updates, they can make a huge impact in the value too. It always comes down to how much dollars are you spending? Does that increase value? All

Dave:
Right. Well, let’s take a quick break, but when we come back, we’re going to talk about some of the bigger impact type of value add investing, light rentos, heavy renos, and ground up development. Stick with us, we’ll be right back.

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Dave:
Welcome back to the BiggerPockets Podcast. I’m here with Henry and James Dainer talking about the value add playbook for 2026. We talked about cosmetic updates and how it’s really just a strategy. If you can find the right deal, it can work for pretty much anyone. There’s just no reason not to do it if you find a deal that it works for. Let’s move on to what Henry described as light renovations. James, what’s the division between a cosmetic update, light renovation, and when do you want to move from sort of the easier projects to a light renovation?

James:
When I look at a light renovation, you can do windows, you can do roof, but you’re not really adding spaces where you got to add a bathroom or reconfigure the layout. That’s where you start going into a heavier renovation when you have to twist a house around. And so a lot of times when you’re leaving things where they are, you can control the cost a lot more. I might be able to open up my kitchen, but if all my appliances are all staying in the same spot, it keeps the cost way down. Or if you can just take everything out of a bathroom, even if you’re fixing the plumbing and doing all those things, but everything stays inside that shell, you’re replacing light for like. And when you’re doing that, there’s way less domino effect that happens in construction because when I buy a house and we’re starting to add bathrooms and bedrooms, costs can domino very quickly.
But when you’re doing light for like, you can price it and price it and price it and really stay on top of that.

Dave:
So what do you look for when you’re looking for a deal? If you want to do a light renovation, what are some of the characteristics of a property that you think make it a good candidate? Henry’s bouncing. I got to throw it to you after this. You have something to say.

Henry:
Yeah. This is a sweet spot for me because I feel like a lot of people want to do these projects and have no idea what to go look for. So when I want to do a light renovation, obviously I’m looking for homes that are in livable condition. So as you’re perusing whatever MLS or Zillow or realtor, you don’t want the things that are down to the studs. So it needs to be in livable condition. But a couple of indicators I’m looking for that let me know that I can probably add real value in a light renovation is I’m looking for covered square footage that’s not accounted for in the heated and cooled square footage. In other words, if there is a sunroom that isn’t heated and cooled, it’s already under roof. And because it’s under roof, I don’t have to do anything structural. All I need to do is figure out a way to heat and cool that space to add it to heated and cooled square footage, which technically makes your home bigger.
The bigger the home, the more square footage, the higher the value of the home. So I’m looking for things like sunrooms, additions maybe that were done that aren’t heated and cooled, right?

Dave:
Basements.

Henry:
Basements. Yeah. You have to have keen eye to see some of those things. And another indicator I look for to help me find some of these are bedroom and bathroom counts where square footage doesn’t seem to match. If I see a two bed, one bath, 2,000 square foot house, that lets me know there’s a lot of opportunity for me to do a light renovation to add bedrooms and bathrooms under the current footprint.

Dave:
Aren’t you always wondering what people are doing with that? There’s like, do you just have like a 900 square foot bedroom? What are you doing in that

Henry:
House? It’s usually the older homes that were built, like the mid-century style homes, they have like a living room and a formal living room and a den, and they have all these living spaces. Those indicators for me scream, “Hey, this could be a light renovation where you can add a lot of value.”

James:
One of the most important things about cosmetic versus heavy is do you have the right spaces already that just need minor tweaking? Because that’s where people get in trouble with value add is they see a four bed, three bath house and they go, “Oh, I got a four bed, three bath house and I can cosmetically update it, but they don’t have the same spaces.” The primary might be way smaller, smaller shower, smaller closet. The kitchen could be half the size and that requires a lot more reconfiguring. I love a cosmetic fixer that is packed full of garbage and it is gross because I call it cosmetic because I don’t have to move walls. And again, I can get that property deeper than grandma’s house because it just smells bad. And so I’d rather spend more on trash and just getting it out. And then I’m working with the same footprint as grandma’s house.
It’s just a little bit maybe moldier, crunchier and smellier.

Dave:
Something I’ve done in the past that’s been really good is like making a formal primary. Sometimes when there’s a small bathroom-

Henry:
All the time.

Dave:
Yeah. It just feels like three kind of mid bedrooms and you make one into a primary, that can really add a lot of space. And maybe you’re only moving one wall or two there. To me, that’s a manageable thing that you could do, still falls under the light renovation category. But I think this is where you sort of get into the true building equity. Cosmetics, maybe you can build some equity, but to me this is where you can actually make a delta in the value of your home.

Henry:
Bro, like a pro tip is usually when there’s a half bath, like I’d say 60 to 70% of the time there’s a closet somewhere close to it or on the other side of that half bath. And a lot of the times I’m able to steal that closet and add a shower. And all of a sudden you have a full bath, especially when they’re in half baths or in primary bedrooms. I’ve stolen space from the closet on the bedroom on the other side to add a shower space. And so you’re not really changing the layout and adding a whole new bathroom. You’re just expanding an existing bathroom, which makes things less expensive because the plumbing’s already there. You’re just reconfiguring some of the existing square footage. You’re doing what James said, which is like for like, you’re just adding an additional piece of that bathroom. Man, it’s so important to just have an eye for those things.
So as you’re looking for properties, pay attention to where the closets are in relation to where the bathrooms are. Pay attention to what rooms back up to each other. I love homes that have the two living rooms, like a formal living room and a regular living room, because no one really uses formal living rooms anymore. It’s not a desirable feature like it was. And most buyers would much prefer to see a house with an additional bedroom than to have that same square footage include one less bedroom and be a formal living space. And so that’s another way I look at adding value.

James:
Yeah. Or in the basements, I love taking, because basements have two beams running down them essentially. You can create a bedroom, but a flex space every time. So every time we do a bedroom in a basement, we always put in big French doors because if the buyer wants a bedroom, they can get that or they can make a bigger bonus room. So it just gives them that option and it’s a non-structural move. We just frame it straight down.

Dave:
James, this can seem intimidating. I think cosmetic most people can wrap their head around, but then starting to move walls, you need some more skills. So what are the skills people need and how do you recommend people get comfortable scaling up from a cosmetic to this kind of rehab?

James:
You don’t have to jump right in. I didn’t start flipping massive projects right out the gate because I did take my first step and I bought my first big fixer and it went terrible. We went way over budget, way over timeframe, and I didn’t know what I didn’t know. And I lost a ton of money on this house. And it was my first big swing on a big fixer. I had to take a step back and go, okay, well, I bought that really cheap. We sold it high. It was what happened in the middle that went sideways. I paid like 275, I sold it for 500, and yet I still lost money. That’s what I had to learn how to control. And so after that house, I was like, “Well, I don’t want to do any more of those, but I want to start learning and kind of partnering people.
” And so back then I was doing a lot of wholesaling and I was also helping investors find deals. And that’s where I learned the most because I started selling them to more experienced investors and I would participate in their project with them.
And on one deal, I even threw my whole assignment fee into the deal and the guy gave me some ownership in it and he just let me go through the process. But I got to learn what are the steps because that’s where people get in trouble. They see a vision, they see the math, they don’t know the steps that it takes. So when you want to get into value, you got to build your core team. And your core team is going to be an architect, an engineer, a general contractor, and you should have three and start just getting the facilitators for you together.
You have to have yourself with the right pieces around you. That’s the key. It’s all about the team. Everyone wants to chase the deal. And I always tell, chase the resources and the team because the team will help you get through that deal. And so if you’re new and you want to get into it, start working out networking, meeting with people, building that team, but then start participating with other people. You can partner with other value add investors and learn that process, see what they’re doing. You get to see the timeframes and all the little hiccups and bumps that go through it. It’s better to give away more upfront and learn to prevent losses down the road.

Dave:
That’s great advice. And it’s something that I’ve been doing with James. He’s been teaching me slowly how to flip, getting a little bit more involved in each deal and it’s been super helpful. The other thing I’ll say for if you want to learn light rehabs, if you listen to the show, you’ve heard my favorite strategy these days is something I call the slow bur. It’s basically you buy a property, it’s doing all right, it’s got tenants, and then you opportunistically renovate it when people move out. Slow bur can be a great strategy for this if you’re new, because number one, if you’re buying something where there’s already tenants, you’re not using hard money like you would in a flip. And so if you’re paying six and a half percent on your mortgage instead of 12% on your mortgage, it takes a little bit of pressure off you to nail it the first time.
If you go two weeks longer, you don’t hate your timeframe exactly, the penalty on that is a little bit less. And the other thing is if you buy something that has tenants in it, it gives you, in my experience, a couple months to make a plan, to build the team that James was just talking about, to get permits if you need to permit something. And it just takes a little bit of that time pressure off, which for me is something that I used to worry about in terms of doing this. It was something that would prevent me from being in real estate, doing these kinds of deals because I just was worried about getting it done quickly while working full-time. And so this is an approach that you can consider.

James:
Right now, I’m in Newport Beach. I just landed here. I don’t have the resources and the teams like I have in Seattle. And so we’re doing the biggest flip we’ve ever done, but I brought in a partner on it because he knew the code, he had the people, and I’m giving away a portion of my deal to him, but my overall construction costs are probably 35% less than they would be if I hired it out and I would still have the learning curve of going through some bumps in this city. And so by bringing him in, I’m really watching the pricing and it’s allowing me to build a correct budget for my next project going, okay, this is what this takes. And my annualized return is actually going to be better even though I’m giving away a big portion of the deal.

Dave:
Henry, when do you cross from light rehab to the intimidating, sounding heavy renovation?

Henry:
Yeah. For me, a heavy renovation is I am touching almost every surface, and that includes the surfaces behind the drywall.

Dave:
Surfaces you don’t want to be touching.

Henry:
Yeah, absolutely. And you’re replacing systems most or all of the systems. You might be redoing the plumbing because you’re moving a kitchen from one side of the house to the other. You may be adding bathrooms. Adding bathrooms doesn’t sound like a big deal if you’re on a crawlspace, but if you’re on a concrete foundation, it gets expensive fast depending on where that main plumbing line is. You could be jackhammering up your foundation all across the entire footprint of the home because the bathroom you want to add and where you access the main line are on completely opposite sides of the house, that is pricey.
So these are the things where it’s not easy to just make a decision on your own. You have to get someone else involved like the city may need to get involved, an engineer may need to get involved and tell you, because people think you can just walk into a house and go, “Oh, that wall’s stupid. Shigon, that’s not how it works.” Some of these walls are load bearing, which means they need to carry the load of the house. And some cities require you to get an engineer to come in and tell you what you can and can’t do or what kind of beam you need to put in to support the weight. If it’s a two-story house, you got to support the floor above it. That’s kind of a big deal. If it’s a single-story house, you don’t want the roof laying on the ground, that thing matters.
So these are the kinds of renovations where you can’t just make a decision and move forward. You’ve got to bring in professionals or city officials to help you get the approvals necessary to make sure that the work you’re doing isn’t just value add, but it’s actually not endangering somebody’s health or safety.

Dave:
That’s a good way to put it. I think that’s sort of the key thing here is you’re going out of your own comfort zone. And at least for me, it’s like you’re going out of just making decisions, being able to run the subs kind of easily yourself into something that’s much, much bigger. But the roar for this is huge, right? Because this to me is where you cross the barrier of no normal homeowner wants to buy these types of properties. You’re getting into a class of inventory that a lot of other people don’t want. Because a normal homeowner might be willing to renovate a bathroom or a kitchen or to do a cosmetic rehab. But this is where you’re sort of working with projects that need a lot of love, but those are the biggest opportunities. And James, this is basically, I mean, not all you do, you do a little bit of everything, but this is like your sweet spot, right?

James:
Yeah, I am glutton for punishment. Flipping is a very hard business to run and it’s very hard to systemize on a long-term basis at scale. I think it’s the hardest by far, but I just love the numbers.

Henry:
This is where the juice is, right? You need the juice. It needs the juice.

James:
And this is how you create value, right? And you create equity for burrs or flipping. This is how you maximize a deal because if I’m looking at a house and it’s a thousand square feet up and it’s a two bed, one bath, and I have a thousand square feet below, and let’s say that house will sell for $400 a square foot on the market, fully finished. That’s the average price. I can renovate a basement and add square footage for about $110 a square foot. That’s where I can 3X and 4X my money because I can go in and go, “I’m going to renovate this basement. I’m going to spend a hundred grand here and I just increase that value.” And so that’s the important part is what do you need to create? Now, it’s not as simple as that because many times it’s $100 a square foot for the entire house.
But in that example, if I’m spending $100 a square foot, I’m spending 200 grand, but I’m getting $400 a square foot on the backside, that’s where it makes sense and you can force that equity up. And so that’s why it’s very important to really run your right comps. What is this property worth? What do I need to create? And then it comes down to what’s the cost to create that. And a flipper’s job or a value add investor’s job is to go, how do I keep that cost at a hundred bucks a foot? Because that is a full-time job to do that. And that’s where people get tripped up because they go, “Oh, the math’s math is simple, but it’s all about controlling those costs.”

Henry:
I agree with you. And I think another differentiator between these heavy renovations and the cosmetic and light that we have been talking about is the amount of subject matter expertise that not only you need to have, but who you hire needs to have in this situation because yes, you have to hire licensed plumbing professionals, licensed electrical professionals, licensed contractors to do a lot of the major work. That goes without saying. But the decisions on what they’re doing, where they’re moving things to, what kind of value that creates, what kind of product that creates, that’s on you as the investor. And you could spend a lot of money on a heavy renovation and not produce a product that your customer wants in the neighborhood that that house is in or doesn’t have the amenities that they have. In lighter cosmetic, we’re leaving things where they are.
The house has what it has. We all already saw that and we want to leave it where it is. But now we’re trying to add value by adding the right spaces or amenities that your buyer wants and you have to have some market expertise to understand that and you have to hire experts to do the work in the right way that you’ll actually get it approved and it won’t sit waiting for permits or you’re going back and forth with the city because they keep denying your permit because you’re not doing things the right way. So it is a much more knowledge specific value add strategy.

Dave:
I think that’s kind of the fun part though too, Hannah.

Henry:
I was going to say, I think this is why Dave likes it because it’s math and Solving problems.

Dave:
It’s like resource allocation, which is my favorite thing. It’s like, okay, I got this budget. How am I going to spend it to maximize the value of this home? James has totally converted me to the dark side now. It’s fun to me to doing this, but it is higher stakes for sure. You can absolutely screw it up. You can overdevelop it, you can under develop it, you can do all these different things. But I was curious, what is the increase in return potential when you go from a light value add to a heavy value add? I don’t know if you know in absolute dollars or your ROI, James, do you have a sense of how much more juice there is?

James:
What I have seen in Seattle is on a six-month project with a heavy value add versus more of a cosmetic where you’re doing Windows roof and everything else. The return is going to be about 30 to 35% cash on cash on a cosmetic. On a value add, we’re looking about 50%.

Dave:
Wow.

James:
And so you get an extra 10 to 15% more for that project and the work you have to do.

Dave:
We got to take one more quick break. Stick with us. We’ll be right back. Welcome back to the BiggerPockets Podcast. Henry and I are here with James Daynerd talking about value add investing. So I’ve been curious about flipping but never done it, but I just want to explain sort of the progression I did to get comfortable with it if other people are interested in this, but don’t want to dive in head first. Basically, I’ve done three flips now. The first one, James, basically I was a passive partner. I just put money into it, just got to sort of observe from a distance, underwrite the deal, but I had no real involvement day-to-day. That one turned out great, thanks to James and his team doing a great job. The second one we did together, but James was basically like, “You could come and look at the property.
We’ll tell you about some of the decisions, but I’m still making all of the decisions.” And that was a really cool experience for me because I got to go to the property. I really learned the order of operations, which is super important to me, when to hire different subs, when to go to the city, just how all the pieces kind of fit together. But I wasn’t on the hook for sort of big decisions about where to allocate money, how we were going to reconfigure the house. But I got to see James and his team sort of think through those things in real time. Then the third one, me and my brother-in-law bought together, we partnered on it and we made the decisions and we actually figured out where we were going to spend money. We hired the GC, we ran the subs. And by that third time we felt comfortable.
We did sell that and made some money. So I just wanted to share that with people that you don’t have to jump right into this. I’m lucky and know James, but there are great flippers and great operators in pretty much any market. And if you want to try and find, like James said, partners where you can be a part of these deals, it’s a really good way, at least for me, it was a really good way to start getting into heavier value add without having to take this all on, both from a financial perspective and a time perspective right away, because I just didn’t feel comfortable with that. You did that too, Henry?

Henry:
I still, to this day, meet some of my best friends and contacts at real estate events. So I’m partnering on a purchase that will close on next week of a flip. And this flip is in the heavy renovation bucket. It was down to the studs. Now, the story on this one was it had a fire five years ago and the lady’s been trying to put it back together and work with the city and she’s just run out of money and she’s failed her inspections. And so she’s got a lot of things to go fix and not a lot of money. So she’s just like, “Somebody please come buy this thing from me. ” So I walked into that deal and I’ve done hundreds of flips, right? I walked into that deal and I said, “I don’t have the comfort level to know how to fix all the problems that the city’s identified.” Because essentially it’s like a ground up development that’s gotten to the point where you’re about to close in the walls and you have to pass your inspection.
That’s what the property is like. And I am just now doing my first grindup development. And so I didn’t want to leave the money on the table, so I brought in my builder who’s helping me build the ground up development. He walked the property with me. We looked at the entire list from the city. We made a plan for every single item that they’ve identified. We called the city, told them about our plan, got them to give us a light, “Yeah, this will work.” And then now we’re buying the property. We’ll fifty fifty on that deal because I brought the deal. I’m even bringing the financing, but he’s going to manage the renovation. He’s going to be responsible for the work, and that’s going to help us do this heavy renovation. And that’s a partner that I met at a real estate event.

Dave:
See, exactly. This is a perfect example. Thank you for Henry.This is an experienced operator who’s taken on partners. This happens all the time. I think honestly, people think that partnering is for beginner investors. Every investor I know partners all the time, every single one. So it’s just get out there and put yourself out there and you can meet these people.

James:
I’ve found a lot of partners at BPON over the years.

Dave:
Yeah, that’s awesome. Good reason to come. And maybe you’ll just come to the Seattle conference and you’ll start meeting some people to partner with March 28th in Seattle, biggerpockets.com.seattle.

James:
I’m so excited for this. We are going under the hood. By the time they’re done, they’re going to be ready to go.

Dave:
I’m excited. This is going to be a super fun event. I think this is one of those topics where you really need to have hands-on coaching. And James and Henry are going to be there coaching. I’m going to be there attending. I just want to learn more. But also one of the cool things is we’re also doing sort of like a premium VIP kind of thing the second day, and we’re renting a bus and we’re going to drive around and James is going to take us to three of his projects that he’s working on. So you’re actually going to go get literal hands-on experience and we’re going to go out to a nice dinner. It’s going to be a lot of fun. So you should definitely come check it out. I will be just making sure everyone is well-fed and is having fun. And James and Henry are going to teach you how to do value add investing.
All right. So that’s heavy value add, a great place to be. But let’s just talk quickly here before we get out of here about new construction, heavy development. James, you do a little bit of both. You prefer flipping from what I hear, but when is a good time to do new construction? Who’s it right for?

James:
It’s just probably some best use. What can you buy it for? How much can you build it for itself? Or I have a partner, Will, and he runs our new construction side. And so it’s still running a performa. What can I buy it for? What’s my cost? What can I sell it for? What’s going to give us the highest profit? And so every deal we look at in Seattle, we look at it both ways. Does it make more sense? How much time does it take? But when you want to get into building, I think it’s really important that you understand what you’re buying. There’s a couple hard rules I have in flipping and development. I don’t buy in hills. I don’t buy wetlands. I don’t buy environmental. It’s a nightmare
And it takes forever. But usually what I see, and I have a partner, so we split this way. It’s after people flip about 20, 30 homes, they start going volume. They switch to building because it’s a lot more systemizable. You can buy it, you get plans, you can get quotes. And I think it really just comes down to what’s the opportunity. I’ll build or flip, but it’s what’s given me the highest profit. What I do is I don’t build a lot right now, but I flip lots off. So that’s how I create value on a property. We buy it, we renovate it kind of more cosmetically, and then we sell off the daddy lot in the back. You don’t always have to build to actually create value. You just have to create the value, which might be a lot or building a house. Absolutely.

Henry:
I’ve been doing this for years. I’ve been buying properties with additional lots, collecting the lot by selling the house and keeping the lot, and then that gives me options. I can either build on it if I want to, if the finances make sense or I can sell it off if the finances make sense. We’re doing one right now. So anytime I have a house that’s on any kind of double lot, I usually make a call to the city right after we close and see, will they allow me to split the lot? And if they will, then I will definitely split it. I’m literally doubling my profit on one of my flips because I sectioned off an acre lot that I’ll sell for 75 grand and I’ll make about 75 grand profit on the flip itself.

Dave:
All right. Well, we’re not going to get too much into new construction today, but it’s just a reminder that it is there. It’s another way to add value if you have a vacant lot. But for most investors, I think right now, think about what level of investing is right for you today. Or if you’re an experienced investor, you could be doing all of them. But if you’re sort of just doing one deal at a time, figure out which one’s right for you because there’s no right answer. If you’re busy, you’re doing it out of state, you’re new, cosmetic works. You just have to find the right deal. Light renovations, you can find these deals. In my experience, you can find these deals right now pretty well where you can add to the value of the home, but also really driving up rents. I think that to me is sort of what I’ve been looking for a lot recently, or you can get into heavy value add because that’s where all the juice is.
It’s really just a question of your strategy, the amount of time, the amount of capital, the amount of experience you have. But I highly recommend for everyone thinking about how you can add value in your portfolio today because it’s just working in 2026. It really just does work. All right. Henry, James, any last thoughts before we get out of here?

James:
Dave, I am excited for our value add conference and for everybody listening, you’re going to get a lot of my internal documents and tip sheets and budget sheets. So if anybody buys a ticket and there’s only 120, you guys, this will be blown out in no time, I will give away my free scope of work checklist. When I’m walking a property, all my team, this is what we fill out to create our scope of work. And that’s what we start with when we’re creating

Dave:
Value. Honestly, that’s worth the price of the ticket alone, so you should definitely check that out. Again, it’s March 28th. You’re going to learn a lot, but it will also be a lot of fun. So definitely join us. James, thanks so much for being here.

Henry:
I will come on anytime.

Dave:
And Henry, as always, thank you.

Henry:
Glad to be here, buddy. I love, love talking value ad.

Dave:
Also, if you like this episode, go listen to episode 1088. It’s one of Henry’s crowning achievements as a podcast host. He gave us 10 ways to add value for under $10,000. It’s an awesome episode. It’s really relatable strategies that anyone can use to go check that out. And of course, if you like this episode, share it with someone, give us a like, give us a review. We always appreciate it. Thanks again. We’ll see you next time.